Consumer confidence in Germany fell to an all-time low of -26.5 for the month of May
The euro has been losing ground since the start of 2022, accelerating the decline in April as the buying pressure surrounding the dollar keeps building amid risk aversion that has been dominating global financial markets this year. After another failed attempt to regain the 20-DMA last week, the common currency extended the plunge to five-year lows below the 1.0600 figure during the European trading hours on Wednesday.
EURUSD dipped to 1.0585 before bouncing slightly to 1.0600, struggling to stage recovery despite the extremely overbought conditions. Adding to the selling pressure surrounding the euro, fresh data out of Germany showed earlier today that consumer confidence tracked by GfK fell to an all-time low of -26.5 for the month of May amid the energy crisis in Europe, geopolitical concerns, and rising inflation.
As the euro revisited the 1.0600 level for the first time since April 2017, price action shows that the pair is yet to find a bottom, with the outlook for the pair staying bearish amid the rallying dollar and the persistent divergence in monetary policy between the ECB and the Federal Reserve.
In the medium term, the sentiment around the common currency would improve if the ECB starts hiking rated at some point around July amid elevated inflation. So far, EURUSD is likely to stay pressured, especially as the Fed is about to raise rated by 50 basis points during the meeting next week.
Later today, the pair could be affected by ECB’s Lagarde speech. Should the central bank governor express concerns over the economic outlook for the Eurozone, the euro may face another sell-off that would take the prices to fresh multi-year lows. A break below 1.0585 would pave the way towards 1.0570, followed by 1.0510.